What Is A Deed Of Covenant When Buying A House?

What Is A Deed Of Covenant When Buying A House?

What Is A Deed Of Covenant When Buying A House?

A deed of covenant is a legal agreement between two parties, typically the owner of a property (the “covenantor”) and a beneficiary (the “covenantee”). It sets out obligations that the covenantor agrees to meet regarding their property.

Deeds of covenant are commonly used when selling leasehold properties. The purchaser enters into a deed with the freeholder, agreeing to comply with the terms of the lease. This gives the freeholder confidence that the new owner will meet their obligations.

The fee for a deed of covenant covers the admin costs of drafting the deed and having it executed. Typical fees are:

  • For a leasehold property, the fee charged by the freeholder to the purchaser is usually £150-£250. This is an additional cost on top of normal conveyancing fees.
  • For freehold property, there is often no set fee but it depends on the specific arrangements in place. A deed may be required due to historic covenants on the land.
  • Other parties involved such as management companies may also charge a fee.
  • Additional legal fees will apply for more complex cases involving bespoke deeds.

The fee may be negotiable, for example the seller could agree to cover it as part of the transaction. Ultimately whoever benefits most from having the deed in place will usually cover the cost.

How Long Does A Deed Of Covenant Take?

For a standard deed of covenant with no complications, allow around 1-2 weeks from start to finish. But it may take longer depending on circumstances.

Here are some key points on how long a deed of covenant takes:

  • The deed itself can typically be drafted within 1-2 working days by a solicitor. It’s a relatively straightforward legal document.
  • After drafting, the deed needs to be approved and executed (signed) by the parties involved. This can add another 2-7 working days depending on responsiveness.
  • The whole process normally takes 5-10 working days from start to completed deed. This allows time for drafting, reviews, approvals and execution.
  • If other legal work is needed beforehand (e.g. enquiries, negotiations), or complications arise, the process will take longer.
  • Similarly it will take longer if any party is slow to respond or unavailable to sign the deed. Chasing signatures can draw things out.
  • Registration with the Land Registry after completion may take a further 2-3 weeks if required. But the deed is legally binding from the date of execution.
  • For leasehold properties, the freeholder’s company procedures can impact timescales. Some are quicker than others.

 

Is A Deed Of Covenant Required For A Freehold Property

Deeds of covenant are important legal agreements between freeholders and management companies that ensure service charges are paid and rules are followed on managed estates. They are a requirement for purchasing most freehold properties on estates with shared amenities.

They are commonly required on managed estates with communal gardens, parking facilities, etc. The deed sets out the owner’s obligations to pay service charges to the management company and comply with estate rules. It ensures obligations pass to future owners when the property is sold.

Without a deed of covenant, management companies would have no legal recourse to recover service charges from owners who fail to pay.

Deeds of covenant protect all owners by ensuring shared costs are fairly apportioned and rules are followed.

They are made under the terms of the property’s transfer document and run with the land in perpetuity.

Freeholders must enter into a deed upon purchasing the property for the management structure to function.

The purpose of the Deed of Covenant is to compel the incoming owner to enter into a covenant directly with the party who has the benefit of the positive covenant, often a management company with the obligation to manage the estate and collect charges from the owners.

The Deed of Covenant contains a covenant in the same form as the original positive covenant. It sets out rules that the new owner must adhere to when living in the property, such as maintaining a shared wall or contributing to the upkeep of communal areas.

To ensure compliance with the Deed of Covenant, the title to the property usually has a restriction applied to it. This restriction generally prevents a new owner from registering their interest unless a certificate is supplied to the Land Registry confirming that the requirements for the Deed of Covenant have been complied with

They are commonly required on managed estates with communal gardens, parking facilities, etc. The deed sets out the owner’s obligations to pay service charges to the management company and comply with estate rules. It ensures obligations pass to future owners when the property is sold.

Without a deed of covenant, management companies would have no legal recourse to recover service charges from owners who fail to pay.

Deeds of covenant protect all owners by ensuring shared costs are fairly apportioned and rules are followed.

They are made under the terms of the property’s transfer document and run with the land in perpetuity.

Freeholders must enter into a deed upon purchasing the property for the management structure to function.

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